(Associated Press) When Venezuelan leader Hugo Chavez survived a vote to oust him this month, the victory eased worries that the world's fifth-largest oil exporter might erupt in political turmoil. Yet trouble still lurks in the country's massive oil sector, with industry experts warning that Venezuela needs long-overdue investment in aging oil fields.

Exploration and production have suffered under Chavez, analysts said, because the populist ruler diverts too much money from the state-run oil company's budget to finance social programs for the poor.

If a better balance isn't struck soon, they said Venezuela, a major supplier of fuel to the United States, faces a potential double whammy: The country could find itself marginalized within OPEC as other nations are given greater market share, and that would mean less oil money available for Chavez's social agenda.

Output still not up to par

At the moment, Venezuela's daily output is about 2.5 million barrels, or 400,000 barrels below its official OPEC quota, according to observers inside and outside the country.

Total Venezuelan output had been above 3 million barrels a day as recently as 2001. But the country was hit by recession and a nationwide strike over the next two years, crippling the oil sector and leading Chavez to fire some 18,000 employees of Petroleos de Venezuela, the state-run giant, for participating in the protest.

"It takes pretty substantial investment to sustain production, let alone increase it," said Robert Cordray, a senior analyst at Washington-based PFC Energy Group who focuses on Latin America. "And it appears that that investment is not happening. If these fields are left to their own devices, it's hard to imagine a scenario where they're not declining."

PDVSA, which owns the gasoline refiner and retailer Citgo Petroleum Corp., has spent only about a third of the $3.3 billion available for exploration and production in 2004, according to Cordray. Moreover, the amount allocated is down 33 percent from the $5 billion originally set aside.

Officials at PDVSA did not return calls seeking comment. Citgo is in the process of moving its headquarters from Tulsa to Houston.

Notwithstanding the woes at PDVSA, there is immense outside interest in Venezuela's oil sector. It is close to the United States, less volatile than some other oil-producing nations and has estimated proven oil reserves of 78 billion barrels.

ChevronTexaco is looking into a possible $6 billion investment to produce heavy crude in the country's Orinoco tar belt and upgrade a facility there, and the Royal Dutch-Shell Group of Companies is said to be interested in a new project there, too.

Seeking bigger presence

"We're very anxious to try and grow our presence in Venezuela," said Steven Tholen, chief financial officer of Harvest Natural Resources, a Houston-based company that has spent some $1 billion in the past decade and produces 20,000 barrels of oil a day in Venezuela, all of which is sold to PDVSA.

He added: "From our standpoint, we're apolitical."

Many analysts believe that Chavez ultimately will spend what is required to maintain the strength of PDVSA, which accounts for roughly half of the government's revenue. And for now, any flaws in Chavez's strategy are not outwardly apparent — funneling billions of dollars from PDVSA into social programs has solidified his political base among the poor. And with oil prices soaring, the country is awash in oil money.

The real challenge will come if oil prices decline sharply. That will leave PDVSA less money to play with, forcing Chavez to make a decision: spend even less on exploration and production, cut back on some social programs or make it more enticing for foreign oil companies to do business there.